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Should You Buy an Extended Warranty?

[Editor’s Note: This post has been republished since its original posting date.]

We had a listener last Saturday who purchased an aftermarket extended warranty from a dealer.He was contemplating canceling the warranty because it was not a Ford Motor Company backed warranty.Here is the answer to his concern and my overall thoughts on extended warranties.

Are Extended Warranties a Good Investment?

I think an extended warranty on a car is a good investment. If you have not priced vehicle repairs lately, like a water pump or air conditioning compressor, you might be shocked as to how much they run these days. We all expect an engine problem or transmission problem will cost a lot, but the other more common repairs will cost you a bundle and, usually, one claim on the warranty will cover the cost of the warranty.

My rules about where to purchase a warranty are simple: from a good dealership. Going one step further, buy it from the dealership you are likely to use for service. This can shortcut your time and trouble in service since they are familiar with the contract rules and stipulations. Should there be a dispute on what is covered and what is not; the dealer you bought the warranty from has a vested interest in your satisfaction.

What if the dealer offers you a non-factory extended warranty?

For many years I recommended only buying the factory policy, in other words, the warranty backed by the manufacturer of the car. As time has gone on, I have softened my stance on this issue.

The real plus of the factory warranty is that it is good at any dealership that sells that brand. The downside is that the dealer has no control of gray areas. If the factory says a problem is not covered or is denied due to perceived abuse, the dealer’s hands are tied. If you have a non-factory warranty, the dealer can call them and plead your case. The dealer is a good customer of warranty companies.

When Should You Buy One?

Timing-wise, if you want to buy a warranty, usually the time you buy the car is the best time. There are surcharges on most warranties if you wait to buy it later. In most cases, you can purchase a warranty on your car up to the time your vehicle is inside the bumper-to-bumper warranty period.

One big thing to know before you purchase a warranty is what time and mileage will work best for you. There are a lot of different combinations. Also, give thought to how much coverage you want. Generally, you can go from basic powertrain coverage, all the way up to plans that cover maintenance. The price, of course, goes up with the higher levels of coverage. You can also usually choose a low deductible amount, or save money on the cost of the warranty by paying a higher deductible.

Can I Ever Get a Discount?

Speaking of price, many times you can get a discount on the warranty just for asking. In a lot of cases, the amount you pay for a warranty is negotiable. Like everything else, it never hurts to ask!

I warn you, too, that I don’t know of any legitimate warranty company that will write a policy on a vehicle with 100,000 miles or more. There are a lot of companies who make the warranties on these mileage vehicles sound great, but generally, in the fine print, there are a lot of ways they can wiggle out of paying the claim.

In Closing

In summary, I recommend you buy a good warranty from a good dealership that will stand behind what it sells. I have seen many cases where extended warranties have saved people from financial ruin.

Jerry I have to disagree a little on the high mileage warranty issue you brought up.
After being in BHPH for 16 years and offering a service contract on 120,000 plus mileage
Vehicles I found an ESP company that really took care of our customers and vehicles.
AUL Service Contracts in Napa California took care of 1000’s of my rigs for 10 years.
Great program Jerry.

There are a few warranty companies with great programs for higher mileage vehicles. One that I have been impressed with is a nation wide company out of Utah (Alpha Warranty) They are underwritten by Assurant Solutions (that’s a good thing) since Assurant is a multi billion dollar assets. Keep in mind that Alpha only sells their warranties through dealerships.

Hi Jerry. I purchased a used 2011 Ford Escape Limited with roughly 33,000 miles on it from a Mercedes dealership. It has almost 35,000 miles on it now, and I am thinking about buying an extended warranty before the factory warranty expires at 36,000 miles. Do you recommend going to the Ford dealership? Is there any negotiating on price?

We always buy the factory Ford warranty and have had good response from dealers wherever we travel in honoring it. We recently purchased a Lincoln MR X here in Plano, but the Lincoln extended warranty price we were quoted from the dealer was over $1000 more than what they are being sold for online. Are the dealers that sell Ford or Lincoln ESP agreements online worth looking into?. I would rather deal with a local dealer, but it seems like it would be a waste of money if the products are the same.

The other question I have is whether you have stated an opinion on the dent insurance and the interior rip and tear and stain insurance the dealers also offer. It seems there are a lot of exclusions to that coverage and we have never purchased it before, but were considering it for the MR X.

Thanks for your show, we were doing business with Sam Pack, and had great buying experiences, but looked into the Lincoln MR X instead of the Ford Edge this time based on your remarks a few weeks ago on the show. If Sam Pack was selling Lincolns here we would have gone right back to them. I know you recommend Don Davis, but that was too far for us to travel..

Good to hear from you Tom. I am happy to help. Speak to Robert Little at 5 Star, 817 498-8838, he takes awesome care of my listeners, and he can do it all with you by mail. He’ll save you money for sure.

Honestly, not sure on the other policies. There are a lot of different companies who write these, some are good, some are really bad. I wish I could be of more help on that.

hi I am presently coming to the end of my 4 year lease on my rx350 with 33,000 miles and am thinking of purchasing it, would like to know of any good warranty companies or if lexus offers a warranty once i buy it

A good warranty can, indeed, save a person from financial ruin. The problem is that good warranties are like good cars: there are only a few of them. Many warranties exempt more than they cover, and come with deductibles that, when you add it up, don’t really pay for much at all. Their primary purpose is to be bundled with the agreed price of the car so that sales can earn a higher commission.

Jerry, I am in the market for ESP for my Ford that currently has 32K miles on it. I spoke with Bob Little at 5 Star (where I bought the car) the other day and he told me his pricing is the same as what I can purchase for online direct from Ford (therefore no incentive to buy from 5 Star.) I was hoping for a discount of sort. Any suggestions? thanks, James

Today my Mustang (that you assisted with purchasing) has 35,870 miles so it was time to seriously shop for a Ford ESP. The Ford Owner site quoted me $2,300. 5StarFord where I purchased the car would not budge on that same price so I compared four other Ford dealership’s online pricing and just purchased (over the phone) a 7 year/125K mile Genuine Ford ESP for $1,040 from Mike Potts at Warrick Ford in Indiana. Please tell your listeners that it pays to shop around and not be beholden to the dealership where they purchased their Ford Motor Company vehicle.
v/r
James
Lytle, Texas

My wife’s 2010 Prius Tech model has 44900 miles and the factory warranty has expired… Have been getting solicitations for non-manufacturer warranties…The vehicle has been bulletproof with no service problems as it’s serviced by the original dealer…At this mileage and the fact that it’s full of electronics, would you suggest buying an extended warranty from the dealer or open market ???

Enjoy your radio show on KEX in Portland…Thanks, in advance, for your suggestion…

Bob, thanks for listening to the show. I would purchase a warranty, and I’d buy it at the dealership you would use for service, it will make it much easier on you. One repair and it’ll probably pay for itself. As good as Prius is, I’d still purchase one for the peace of mind.

I agree with the points made above. Excellent short and crisp analysis on extended warranty.

An extended Warranty covers the cost of specified repairs after the car’s manufacturer warranty
expires.Different warranties cover different repairs, but basically an extended warranty kicks in after the manufacturer’s warranty expires.I have purchased extended warranty for my car from Warrantech and he gave excellent plans which are very beneficial for me and saves lot of my money.Now considering the benefits and excellent service, I would recommend Warrentech all my friends.

I just purchased a GL450 2015 with only 6000 miles from a third party dealer. The manufacturer’s waranty on the MB expires in 2.5 years but I was offered an extended warranty from Warrantech for $3900 for additional 3 years. Anyone has any recommnendations with this company lately. Is it worth the $3900. I have 30 or 60 days to cancel the warranty and I’m currently considering it since there’s is a lot of negative reviews about this company.

I have purchased extended warranties for 5 Cars/SUV’s over the years. 4 from the manufacturer (Nissan, Honda, Mercedes) and one from an aftermarket insurance company recommended by the credit union that financed one of them.

Key Points:

If your car qualifies to get a Manufacturer’s Extended Warranty (MEW)—that is the way to go. I had to fight too much to get things covered under an aftermarket warranty—they looked to exclude too often.

If you have a MEW, plan on taking your car to the dealer (preferably the same one) for all servicing, oil changes, etc. That way they have a complete record in case the Manufacturer wants to claim for example that the Tranny went out because you did not change the fluid timely—it’s the dealer’s fault for not doing it—you always go there for your service–they missed it. If you jump around for service—you give the warranty company too many ways not to cover a repair.

Having a MEW keeps the dealer honest when recommending repairs. For example—One time the dealer told me that the power steering pump was leaking and it will get worse and should be replaced. I said sorry to hear that, go ahead and replace it…I have a MEW. Service advisor says, Oh—I did not see that on your record–we changed computers recently. I showed him my documents—he entered it in his computer again and said it will be covered. He was getting ready to give me a loaner (covered by the MEW)—comes back and says, the tech took another look and saw that the leak was just some water from when they were cleaning off under the hood. No power-steering pump needed at this time.

When you have a MEW—the dealer must be able to justify the necessity for the repair to the manufacture—so they are less likely to fudge it. They want to keep their dealership.

Regarding pricing. If you like your dealer, they made you an excellent deal on your car, just pay what they are asking for the MEW—let them make some profit. Or like Jerry says—ask them to take 10% off. I have found for some manufactures you can buy one on the Internet at near cost because some dealers do a volume business in MEW’s. For my Honda MEW here is an example of the difference in price: A 7 year, 125K Honda Care Platinum warranty at the dealer that sold me the car in 2009 was 2100.00. On the Internet it was 1200.00. The selling dealer would not negotiate one dollar—it was take it or leave it at 2100. But a Honda dealer 50 miles away that sells on the Internet was OK selling me the same Honda Care for 1200. It’s hard to walk away from that savings.

Get a MEW if you can—Most of mine have paid for themselves and the Mercedes one paid for itself 3x over. Always get a MEW if you are buying a German or European car and plan on keeping it more than 50K miles. You will use it!

Thank you for listening to the show. I appreciate your opinion, and you have some valid points. I wouldn’t paint the subject with that broad a brush, I have seen cases where the dealer had more influence with a 3rd party company. But your points are valid and appreciated!

Extended Warranty. I have read your Q&A section on extended warranties. We bought our 2012 Enclave from Classic in Arlington. I got in the mail one labeled Buick Protection Plan Buick Program head quarters. the fine print says it is provided by AMT Warranty company. Classic says it is no good and is NOT a Buick Manufacturing Warranty. Classic gave me a brochure for an extended warranty which is labeled MBPI Preferred. the question I have about the MBPI is that if I always take the car back to Classic in Arlington there is no Co-Pay but if I were on a road trip and needed service I would have to pay $100.00 Co-Pay. My history with extended warranties was with the manufacturer where I could take it to any dealer and the repairs were taken care with no Co-Pay. What do you think and recommend?
Thank you always for being there with our questions.

Classic is a top notch dealership and I would go with their recommendation. Odds are small you’ll need the warranty when out of town, so I think their warranty is a really good one. Don’t be afraid to ask for a listener discount on it, there may be a little room in the price.

2009 Mazda Tribute, bought 08-03-09, have 51,302 miles now (average 8,550 miles per year). excellent shape. We are seniors and are looking at American Auto Shield Extended Warranty for 5 more years or when mileage on car reaches 100.000 miles (so about 49,000 of additional miles covered). Cost is $2886.00. It has a $100 deductible per claim and they say they will pay Mazda dealership direct for repairs. Covers, powertrain, engine, transmission, transfer unit 4X4 (which we do not have), drive axle assembly, front and rear suspension, steering, air conditioning unit, electronics, seals, gaskets, brake system, high tech electrical system and more. Is this all right to do in your opinion and is the company good?

So we are purchasing a 2015 F150 and will purchase the Ford ESP. Does it make sense financially to purchase it when the truck hits 35,000 miles, right before the bumper to bumper warranty expires, or purchase when the truck is new? Thanks for your input.

Jerry, I am seeking advice on an extended warranty for my 2011 Mercedes GL 450. It is out of factory warranty and would cost ~ $6000 for 3 yrs / 36K mile bumper to bumper w/ a $500 deductible. The car has ~ 45K mileage and is in great condition except for needing work on suspension.

Coincidentally, we bought the vehicle at Alex Rodriguez MB who is no longer there.

Ken, good to hear from you! I think the warranty is a good idea, but think I can save you some money at MB of Sugar Land. They are wonderful to my listeners and have an exceptional service department. Talk to my friend Mike Baches, he’ll hook you up with one of his Finance people. Click here: https://www.carprousa.com/dealer/mercedes-benz-sugar-land/houston

Hi Jerry, we listen all of the time. My daughter just bought a 2013 VW Touareg Sport, 26,600 Miles, from Larry H. Miller VW in Lakewood, CO. Researching the warranties so many to choose from. I saw bad reviews from the same name dealerships, but other state locations, and I told her to hold off. It is their (TotalCare Auto VSC, by Landcar, showed owned by Larry H Miller)? I spoke with the service department before she bought the vehicle, he said some good company’s he sees is, Fidelity, CNA and Landcar? I am researching others, (American Standard Auto, VW Drive Easy..? I think I’ve had ESP in the past and Assurant? Someone mentioned MaxCare?? Now I’m totally confused!! Please help me make the correct decision!! Thank you in advance!

Recently I got a 2013 CPO Lexus ES350 with 33400 miles on it (current warranty still have 3 years to go with unlimited mileage). I paid $3500 to get 5 years extended warranty unlimited mileage, do you think it’s worth it?

I bought a 2015 Ford Edge from Gresham Ford, love the vehicle and experience was great! I now have 20.000 miles on it and am considering an extended warranty. Unfortunately, I live quite a few miles from Gresham. Any ideas about purchasing an extended warranty?

Am a big fan of the Car Pro Show. My daughter was looking to puchase a new car so I directed her and her fiance to a Car Pro Dealer for the VIP experience. I tried to print the certificate online, but it wouldn’t print. I was directed to call and tell the dealer we were a Car Pro referral. They made the drive to the dealership where they were there over 6 hoiurs. They did end up purchasing a new Toyota Prius. They were satisfied with the price of the car, but were surprised with the experience with F&I, $3500 for an extended warranty, $900 plus for gap insurance, $500 tire roadside hazard protection, $950 for the Cilajet, etc. They felt like it was a bait and switch by the time they were done. Each one of those products and services are priced at top retail. They felt like they were set up. Though they asked for Charles Dean, another individual said Charles was no longer involved in the direct sale of the vehilcles. Is this the typical VIP process? Any suggetions?

I am sorry to hear of the experience. Charles does help my listeners often but he also offices at the Chevy store so is not always there, When our system got overwhelmed and the certificates would not print, it caused some problems. When a certificate gets sent out, it notifies Charles who then watches over the deal. – Jerry Reynolds

I own a 2007 lexus 400h suv hybrid with 62,000 miles and want to get an extended warranty as the current warranty is for only 7 years. Is it possible to get at least 10 or more years on the extended warranty and could you please suggest any companies who do them?
Thank you

I don’t think any legitimate company will write an additional policy due to the age of the vehicle. Your best shot is to contact your current provider to see what they can offer in the way of extensions, since they know your car. I hope it works out! Jerry

I purchased a new Honda CRV on the 29th of October and cancelled the Honda extended warranty on the 4th of October. On the form it stated “refund will take approximately 6 to eight weeks”. Every time I called to inquire no one at dealership had information about my refund. But when I called on the 29th of December the finance manager e-mailed me a form saying I had to fill it out quickly before it got too late. A clause at the end of the page said “To avoid possible cancellation penalties, please submit this completed form within 10 days of customer’s request form”. I understand I am the customer and my questions is who pays the penalty? Also on the “Honda care” form under cancellations it says “A 10% penalty per month shall be added a refund that is not paid or credited before the 46th day after We (?) receive YOUR cancellation request”. 1)The dealership took their time to send the forms in a timely manner. 2)Honda Care letter dated January 16th said the refund check would be sent to capital one within 15 days from date of “this letter”. Any suggestions on how to deal with all of this?

I’m afraid I can’t of much help here. Different dealerships AND different warranty companies all have different processes. According to what you wrote, you canceled the policy before you bought the vehicle which is a bit confusing. Nevertheless, I would call the GM at the dealership and make sure he is aware of this. I ALWAYS recommend sending cancellation requests by certified mail. Hopefully, the GM can assist you.

Lots of comments on this topic. Obviously an important and hot button issue. One time to definitely not buy an extended warranty: when you are leasing a car for a number of months and miles that will not exceed the manufacturer’s warranty. Believe it or not, I had a dealer try to sell me an extended warranty for a car I was not planning to keep beyond the lease, which coincided with the length of the manufacturer’s warranty. I leased from someone lese.

I don’t know if there is ever a hard fast rule on this… You should always buy one or you should never buy one. My sense, after 55 years on the planet, is it depends on more factors than we can list. Dealer, Make, Model, Financial situation, Manufacturer history, the likelihood the vehicle in questions will have issues (& when!).

Given that most major repairs happen later in the life of the vehicle, a decent argument could be made to put the warranty money in a solid fund and periodically add to it. Something happens, you pull from this ‘vehicle rainy day’ fund.

The reality is that every purchaser should do the homework, the math, & make a decision in their own best interests factoring in all the known information. I think using Jerry’s sage wisdom on this as a GENERAL rule is fine, but please do the due diligence – it minimizes the chances of buyer’s remorse.

If you are saying you are at the end of your lease and are about to purchase your leased vehicle, then yes, I would buy the warranty. If you are at the beginning of your lease, no I would not until the end of the lease and only then if you are purchasing it. Hope this helps.

After reading through all of the previous comments, I still have questions about purchasing a $2100 6 year or 100,00 miles Warranty – Century Service Plus for a new Lexus RX350 offered by the dealership…Is this a fair market price? and do I need it for a new car? or should I wait?

I’m not familiar with that brand warranty, and I don’t know what all it covers, so it’s impossible for me to say. As I said in the article, good dealerships sell good warranties, so if it is a reputable dealership, it’s probably an OK warranty. If it is not associated with a dealership, pass on it.

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